DoD's $485M Turbine Fuel Contract Awarded to Sinclair Oil Corporation Under Full and Open Competition

Contract Overview

Contract Amount: $48,470,170 ($48.5M)

Contractor: Sinclair OIL Corporation

Awarding Agency: Department of Defense

Start Date: 2007-09-06

End Date: 2008-10-31

Contract Duration: 421 days

Daily Burn Rate: $115.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 15

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: TURBINE FUEL, AVIATION (JP8)

Place of Performance

Location: SINCLAIR, CARBON County, WYOMING, 82334

State: Wyoming Government Spending

Plain-Language Summary

Department of Defense obligated $48.5 million to SINCLAIR OIL CORPORATION for work described as: TURBINE FUEL, AVIATION (JP8) Key points: 1. Contract awarded for aviation turbine fuel, indicating a critical need for military operations. 2. Full and open competition suggests a robust bidding process, potentially leading to competitive pricing. 3. The contract duration of 421 days points to a medium-term supply requirement. 4. Awarded by the Defense Logistics Agency, highlighting its role in managing fuel supplies for the military. 5. The fixed-price with economic price adjustment structure aims to balance cost stability with market fluctuations. 6. Sinclair Oil Corporation, a significant player in the petroleum industry, secured this substantial award.

Value Assessment

Rating: good

The contract value of $484,701,701 for aviation turbine fuel over approximately 14 months appears reasonable given the scale of military fuel requirements. Benchmarking against similar large-scale fuel procurements by the DoD would provide a more precise value-for-money assessment. The economic price adjustment clause is standard for fuel contracts to account for market volatility, which can mitigate risk for both parties but requires careful monitoring to ensure fair pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. With 15 bids received, this suggests a healthy level of competition for this significant fuel supply contract. A higher number of bids generally correlates with better price discovery and potentially lower costs for the government.

Taxpayer Impact: The extensive competition for this fuel contract is beneficial for taxpayers as it likely drove down prices and ensured the government received competitive market rates for a critical aviation fuel.

Public Impact

Military aviation units across various branches will benefit from a reliable supply of JP8 turbine fuel. Ensures operational readiness and mission capability for aircraft dependent on this specific fuel type. The contract supports the Defense Logistics Agency's mission to provide logistical support to the U.S. Armed Forces. Indirectly supports the petroleum refining and distribution workforce involved in producing and delivering the fuel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to the economic price adjustment clause, requiring diligent oversight.
Dependence on a single contractor for a critical fuel supply could pose a risk if supply chain issues arise.
Geographic concentration of award to Wyoming may limit broader regional competition in future solicitations.

Positive Signals

Awarded under full and open competition, indicating a competitive bidding process.
Received 15 bids, suggesting strong market interest and a competitive environment.
Sinclair Oil Corporation is an established entity in the oil industry, implying a degree of reliability.
The contract type (fixed price with EPA) is designed to manage price fluctuations inherent in fuel markets.

Sector Analysis

This contract falls within the broader energy sector, specifically the refining and distribution of petroleum products. The market for aviation fuels is substantial, driven by commercial airlines and military operations. The DoD is a major consumer of petroleum products, and contracts like this are essential for maintaining operational readiness. Comparable spending benchmarks would involve analyzing other large-scale fuel procurements by government agencies and major fuel suppliers.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses stemming from a small business set-aside. The primary focus of this large-scale fuel procurement is likely on major refiners and distributors capable of meeting the volume and logistical demands.

Oversight & Accountability

Oversight for this contract would primarily reside with the Defense Logistics Agency (DLA) contracting officers and contract specialists. They are responsible for monitoring performance, ensuring compliance with contract terms, and managing the economic price adjustment provisions. The DLA also has an Inspector General's office that can investigate potential fraud, waste, or abuse related to contract execution. Transparency is facilitated through contract award databases like FPDS.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Aviation Fuel Supply Contracts
Petroleum Product Distribution
Fixed Price with Economic Price Adjustment Contracts
DoD Energy Procurement

Risk Flags

Potential for price volatility
Supply chain disruption risk
Contractor performance monitoring
Economic price adjustment oversight

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $48.5 million to SINCLAIR OIL CORPORATION. TURBINE FUEL, AVIATION (JP8)

Who is the contractor on this award?

The obligated recipient is SINCLAIR OIL CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $48.5 million.

What is the period of performance?

Start: 2007-09-06. End: 2008-10-31.

What is the historical spending pattern for aviation turbine fuel (JP8) by the Defense Logistics Agency?

Analyzing historical spending patterns for JP8 by the DLA reveals a consistent and significant demand driven by military aviation operations. Over the past decade, the DLA has awarded numerous contracts for aviation fuels, with values often reaching hundreds of millions of dollars annually. Spending fluctuates based on geopolitical events, operational tempo, and global fuel market prices. Contracts are typically awarded through competitive solicitations, though specific awardees and pricing can vary year to year. The DLA aims to secure stable, long-term supply agreements while leveraging competition to achieve cost efficiencies. Understanding these patterns is crucial for forecasting future needs and budgeting effectively.

How does the pricing structure (Fixed Price with Economic Price Adjustment) compare to other fuel contracts awarded by the DoD?

The Fixed Price with Economic Price Adjustment (FPEPA) structure is a common and often preferred method for procuring commodities like fuel, where market prices are inherently volatile. Compared to a simple Fixed Price contract, FPEPA offers greater flexibility by allowing for price adjustments based on pre-defined economic indicators, typically linked to published fuel indices. This mitigates the risk of significant price spikes for the government while preventing the contractor from absorbing potentially ruinous losses due to market downturns. Other DoD fuel contracts might utilize different structures, such as Firm Fixed Price (FFP) for shorter durations or when market stability is high, or Cost-Plus contracts for specialized services, but FPEPA remains prevalent for bulk fuel procurement due to its balance of cost control and risk management.

What is Sinclair Oil Corporation's track record in fulfilling large government fuel contracts?

Sinclair Oil Corporation has a history of participating in and winning significant fuel supply contracts, including those with government entities. As a major refiner and marketer of petroleum products, the company possesses the infrastructure and capacity to handle large-scale procurements. While specific performance metrics for every contract are not publicly detailed, their continued participation and success in competitive bidding processes suggest a generally reliable track record. Government agencies typically vet potential contractors based on past performance, financial stability, and technical capabilities. Sinclair's ability to secure contracts like this DoD award indicates they meet these stringent requirements, although ongoing monitoring by the contracting agency is standard practice.

What are the potential risks associated with relying on a single contractor for a critical fuel supply like JP8?

Relying on a single contractor for a critical fuel supply like JP8 introduces several potential risks. Firstly, supply chain disruptions, whether due to natural disasters, geopolitical instability, labor issues, or unforeseen operational problems at the contractor's facilities, could lead to shortages and impact military readiness. Secondly, reduced competition in future solicitations could potentially lead to higher prices if the incumbent contractor faces less pressure to offer aggressive pricing. Thirdly, there's a risk of contractor default or performance issues, which could necessitate a costly and time-consuming emergency procurement process. Robust contingency planning, including maintaining strategic reserves and qualifying backup suppliers, is essential to mitigate these risks.

How does the geographic location of the award (Wyoming) impact the logistics and cost of fuel delivery?

The award to Sinclair Oil Corporation, based in Wyoming, has direct implications for the logistics and cost of delivering JP8 turbine fuel. Wyoming is a significant oil-producing state, and Sinclair operates refineries there. This proximity likely reduces transportation costs and lead times for fuel originating from their facilities. However, the military's fuel needs are often distributed across numerous bases, potentially both within and outside the immediate region. Therefore, the overall cost-effectiveness depends on the specific delivery points mandated by the contract and the efficiency of Sinclair's distribution network to reach those locations. If delivery is required to distant bases, transportation costs could increase, potentially offsetting the benefits of local refining.

Industry Classification

NAICS: Manufacturing › Petroleum and Coal Products Manufacturing › Petroleum Refineries

Product/Service Code: FUELS, LUBRICANTS, OILS, WAXES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060007R0161

Offers Received: 15

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Address: 550E SOUTH TEMPLE, SALT LAKE CITY, UT, 90

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $48,470,170

Exercised Options: $48,470,170

Current Obligation: $48,470,170

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060007D0507

IDV Type: IDC

Timeline